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Archive for the ‘Fundraising’ Category

No one ever has to give money

Posted by Christopher Dann
Monday August 12, 2013
Categories: Fundraising, Trends, Uncategorized
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No one ever has to give money. Donations come at donor discretion. So while we have to know a lot about competition within the donor marketplace, we also should know about competition for discretionary money. The former helps us position our fundraising; the latter helps us frame our business model with realistic expectations.

There’s a valuable source of good data for studying trends in discretionary spending. The Bureau of Labor Statistics’ Consumer Expenditure Survey (http://www.bls.gov/cex/) primarily serves to track consumer prices. But it provides an annual trove of data on how much consumers are spending on a wide variety of goods and services.

The editors of The New Strategist Publications draw on all that data and reconfigure its presentation for easy and convenient reference. The Survey is, they have said, “the best source of information about spending behavior of American households.”

The survey also asks about cash contributions and personal tax payments. So it gives us three valuable perspectives on trends affecting charitable giving: changes in cash contributions alone; changes in other areas of discretionary spending; and changes in cash contributions relative to changes in personal tax payments. Here are summary views of each of these three perspectives.

First, we look at trend data for cash contributions in the context of other discretionary spending. For that we’ve selected five items out of the 101 categories and sub-categories New Strategists report in their recently released Who’s Buying – Executive Summary of Household Spending, 8th Edition.

Table 1

We also selected just key fundraising demographics out of the multitude available: age ranges in which discretionary income makes its way into charity, household income and configuration where giving is maximized, and the key threshold of education attainment at which giving also becomes significant.

On the one hand, it’s a bleak picture, albeit one that shouldn’t surprise. On the other hand it offers us a clearer understanding of why recovery in areas of discretionary spending is so sluggish and extended.

Next, we looked at cash contributions and personal tax payments, knowing that there is a general functional relationship between household tax burden and giving, especially at higher levels of charity and philanthropy: the higher the tax burden, the more those who itemize deductions tend to give.

Table 2

 

Third, just looking at cash contributions alone, we wanted to check on our assumptions of key demographics. We do that by looking at the report’s useful indexing of expenditures. For Table 3, we have selected the two most important demographic indicators of giving, age and education, finding that patterns seen for decades haven’t changed.

Table 3

Insights into a large class of elite donors

Posted by Christopher Dann
Monday June 24, 2013
Categories: Demographics, Fundraising, Research, Statistics, Uncategorized
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…are the major contributions to our understanding of giving found in the Fidelity Charitable Giving Report, 2013 edition recently published through Fidelity’s website.

Fidelity sampled their 94,000 donors connected to nearly 58,000 giving accounts to produce multiple perspectives on who these donors are and how they give.

Their profile underscores a point we have had occasion to make repeatedly, that the prime time age range of giving begins at 55 when household discretionary income tends to have its growth spurt. While the average age of the Fidelity Charitable donor is 62, the average age at which funds are established is 54.

In all the age profile looks very much like that of most donor files we have researched:

Chart1

While the age profile of Fidelity donors varies little or not at all from that of the general donor population, patterns of their giving do vary.  In contrast to the approximate $3,500 the average itemizing tax filing household gives, the Fidelity donor’s average grant was $3,773 in 2012 and they gave an average 7.1 grants.

Here are the variances from norm of the distributions of Fidelity donor grants:

Chart2

*note, giving in response to Sandy increased Human Services sub-sector giving an estimated 1% in 2012

Donor-advised funds such as Fidelity Charitable have become an important sub-sector on their own. While overall individual giving, adjusted for inflation, dropped 11.3% from 2007 to 2012 (despite Sandy), gifts to donor-advised fund accounts grew 17%. While the former is clearly an effect of what’s happened to the economy, the latter seems to be because of economic uncertainly. Donor-advised funds have become a means of a new form of planned giving.

What Are Our Best Prospects Worried About?

Posted by Christopher Dann
Thursday May 30, 2013
Categories: Fundraising, Gallup, Statistics
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We have frequently advanced the thesis that the bull’s eye of fundraising’s target market is people from the ages of 45 to 64, more precisely those between 50 and 64. These are the ages in which people have the most money at their discretion; and since all giving is voluntary it depends on discretionary income.

When we look at fundraising performance, and it’s not what we expected it to be, it helps to know what’s on our donors’ minds. We often reference the Consumer Confidence Index as a reliable barometer of donor disposition. Earlier this month the Gallup organization released findings from their annual Economy and Personal Finance Survey that adds valuable perspective.

Table1As part of their survey, Gallup asked their national probability sample how much they worry about eight different personal financial matters. In general, those most worried about most of the eight topics were people age 50 to 64.  At right are the percentages for very and moderately worried, by age range, for the eight personal financial matters.

Gallup’s data helps us narrow this perspective by looking at the same financial matters from the standpoint of household income.  They reported five ranges, but since discretionary income is most likely to be found in the top three of the five, we’ll just show those here:

Table2Think of these percentages as magnitude of wind in our faces. It takes a lot more skill and finesse to sail into the wind than is does to sail with the wind behind you.

Make Room for Charity Facilitators

Posted by Christopher Dann
Wednesday January 30, 2013
Categories: Charity Facilitators, Fundraising
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In a paper we are circulating today, Mananging Disruptive and Transformative Changes in the Media of Fundraising, we describe the new, internet-spawned charity facilitator as having both disruptive and transformative impact on the nonprofit sector.

A charity facilitator is an entity whose purpose is to connect donors to organizations, projects, and people doing good work. For the most part, these new web-based enterprises are facilitating connections to the developing world. www.globalgving.org and www.givingwhatyoucan.org are good examples. But some – most prominently www.guidestar.org and www.greatnonprofits.org  – focus domestically.

Whether an organization regards charity facilitators as threat or opportunity at present, the fact is they are bound to grow in influence over future giving. To the extent they undermine middleman organizations or employ questionable criteria for selecting candidate beneficiaries, they pose a threat. To the extent they bring internet traffic to organizations that don’t have the means to do that themselves and welcome the help of facilitation, they offer opportunity.

In either case, we must also pay attention to two ways in which charity facilities could cause great mischief. One is adopting a crowd-source Yelp or Zagat approach to grading charities. It’s hard to foresee any real good coming of that. The other is promoting direct funding of projects in the developing world simply on the basis of maintaining that donors can achieve more good with their charity.

Charity facilitators and the disruptive and mischievous effects they can have underscore once again the need for organizations to better account for themselves to their donors and to market themselves better to the donors they would like to have.  It’s a given that no one can tell an organization’s story better.

Trends in Public Support

Posted by Christopher Dann
Thursday January 3, 2013
Categories: Fundraising, Statistics, Trends, Uncategorized
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In a November posting Fiscal Chasm we reported and commented on data from the Urban Institute Press Nonprofit Almanac 2012 showing, across a selection of sub-sectors, the disparities between increases in the numbers of organizations from 2000 to 2010 and increases in income.

We referenced total income in that posting. That is useful for CEOs. For CDOs it’s more useful to look just at income that comes from fundraising. The Urban Institute combines private contributions and government grants into data labeled public support. If we look at the disparity between sub-sector growth and percentage change in public support, we see a different picture. Then, if we add reference to each sub-sectors share of overall public support, we get an assessment of the fundraising competition for each sub-sector.

Changes in numbers of orgs Jan 3 2013

That is what is shown in the table for a selection of sub-sectors. The data pertain to those 366,086 organizations in 2010 classified as reporting public charities. These are nonprofit organizations with charitable purpose that had $50,000 or more in gross receipts in 2010, were required to and did file 990s. While we can’t ignore the 613,815 additional public charities that were registered with the IRS in 2010, focusing on reporting public charities gives us more solid analytical standing.

Figures here showing shares of public support are different than what one regularly sees in GivingUSA annual reports. The data here are based strictly on IRS filings of reporting organizations while GivingUSA data are based on tabulations of tax data as well as econometric analyses of data and information from a variety of sources. Urban Institute data reflect only reporting religion-related nonprofits, substantially understating religious giving, which GivingUSA addresses through special (unpublished) methods.

There are only three sub-sectors where change in public support between 2000 and 2010 exceeded growth in the number of reporting organizations.

  • The extraordinary 190.2% increase in public support in the Human Services/Public Safety & Disaster sub-sector reflects the Haiti earthquake in 2010 and the lack of a major, high-profile disaster in 2000.  It’s an anomaly.
  • The 101.7% increase in International & Foreign Affairs is likely also reflecting response to Haiti channeled through organizations not classified as public safety and disaster responders. But we should also be mindful of the growing emphasis on impact investing and other forms of human health and welfare giving in the developing world, particularly by online charity facilitators such as GiveWell and GlobalGiving.
  • And in the Education sub-sector, it’s worth a contemplative pause to think about what’s happened in elementary and secondary education where public support increased 84.1%. Undoubtedly we are seeing evidence of both increasing numbers of charter schools as well as public schools’ increasing dependence on charity to supplement tax-based funding.

In all other cases, expansion of the sub-sector over the decade exceeded expansion of its public support. More organizations are competing for fewer dollars in grants and the contributions of individual donors. One or more of three things is likely happening to organizations as a consequence of these trends: they are reducing their program expenditures; they are financing deficits from endowments or reserves; or they are building sources of non-charitable funding.

The best course for building sources of non-charitable funding is in fees for services that are program related. Developing program-related service revenue not only avoids unrelated business income tax but takes advantage of skills and resources organizations already employ. It also often opens opportunities for beginning relationships with customers (or subscribers or patrons) that can later be expanded to charitable donor relationships. As smart as this course is it needs to be pursued with very careful attention to integrating strategies between the two areas of income development and between the marketing efforts for each of them. Because, as this blog often reiterates, all giving is voluntary, the downside of uncoordinated strategy is far greater for charitable support than it is for program service income.

Disruptive Demography in Atlanta, Charlotte, Chicago…

Posted by Christopher Dann
Thursday December 13, 2012
Categories: Demographics, Fundraising, Trends
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…Cleveland, Denver, Houston, New York, Philadelphia, Phoenix.

Anyone involved in raising money nationally or in any of these cities – or cities like any of them – should read and add to one’s library Alan Ehrenhalt’s The Great Inversion and the Future of the American City¹.

In his prologue, Ehrenhalt writes, “The truth is we are living at a moment in which the massive outward migration of the affluent that characterized the second half of the twentieth century is coming to an end. And we need to adjust our perceptions of cities, suburbs, and urban mobility as a result.”

With Bowling Alone, Robert Putnam helped us understand the connection between a community’s social capital and its philanthropic capacity. Alan Ehrenhalt gives us an entirely different perspective on why metropolitan areas present themselves so differently as markets for fundraising, and how they are changing.

With so many challenges close at hand, you need not be concerned (although you might be) with the future of the American City to find immediate value in The Great Inversion.

For one thing, there’s great value in knowing the demographic phenomena affecting the trends Ehrenhalt writes about. He posits that the great inversion is being prompted, for example, by a 50% increase that will occur over the coming two decades in the proportion of the population over 65 (good news for nonprofits); that while homeownership exceeded 69% in 2004 it is heading southward (not so good news); and that we are headed rapidly toward having more single-member households than households with children (news of mixed value).

While giving tends to develop during years in which people have maximum discretionary income, it tends to mature in the years that follow retirement (generally, after 65).

Homeownership has tended to correlate with community social capital stake-holding. While giving up homeownership might not make a difference among donors already committed to a community’s nonprofit organizations, the decline seems most likely to be affected by people choosing never to buy homes nor to become vested in the quality of a community’s life.

Similarly, children tend to anchor families to communities and incline parents toward communities of better social capital, while households with adult couples have consistently proved better donor households than those with single adults.

Ehrenhalt describes the precedence set by trends well underway in Chicago and New York; what’s gone right in near-suburban Washington and wrong in near-suburban Cleveland; what’s being attempted and succeeding in Denver and Charlotte, the false starts that have occurred in Houston and Phoenix, and why Philadelphia presents an “uneasy coexistence.”

While The Great Inversion helps fundraisers — indeed, nonprofit managers — set their plans and aspirations in the cities explored in the book and cities like them, it also offers valuable caution to national organizations bent on scaling their fundraising investments by treating everyone in every place everywhere the same. As much as the template designs of nationwide retail emporia have made some parts of every metropolitan area look exactly alike, there still are distinctions that attract people to settle in, join, and contribute to one city over another.  There’s the interstate highway, commercial visage of metropolitan America, which gives us all the impression of going nowhere very fast, and then there is the human visage. And there’s no doubt which one we should have.

 


¹2012, Borzoi Books (Alfred A. Knopf), New York

Charitable Deductions

Posted by Christopher Dann
Monday December 10, 2012
Categories: Charitable Deductions, Fiscal Cliff, Fundraising
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In a blog last September (Tax Deductibility is Too Complex for Simple-Minded Position-Taking) we hypothesized about the relationship between the charitable deduction and the other three most commonly employed tax deductions, mortgage interest, property, and state and local income taxes.

As discussions continue in Washington — and they are likely to continue well into next year — another look at these deductibles is in order.

The reason is the nonprofit sector has far less influence on either the Administration or Congress than state and local governments or the banking and real estate industries do, and they will defend mightily their interests in keeping those deductions.

We just reviewed IRS deduction data for 2010, the latest year for which data are available. In 2010, 33% of returns itemized deductions. Of these 87% claimed real estate taxes, 82% charitable contributions. 78% mortgage interest, and 71% state and local income taxes.

Two kinds of deductions for which percentages of adjusted gross income (AGI) thresholds apply — casualty losses and medical expenses come in at far fewer percentages. We would expect that of casualty losses anyway (only 1.5%). But with either a threshold or cap being considered for charitable deductions, it’s worth noting that while 100% of tax filers presumably have medical expenses, only 22% got to claim deductions in 2010.

The total amount of itemized deductions came to $1.234 trillion. What the Administration and Congress will be focusing on will be revenue foregone by these deductions, or what in D.C. tax-speak is called “Tax Expenditures.”  State and local income taxes (20%) and real estate taxes (14%) combined for 34% of the value of itemized deductions. General sales taxes added another 1.5%. Mortgage interest accounted for 32%.

Charitable deductions accounted for 14% of the total value of itemized deductions in 2010.  Despite its lesser value than all other categories but real estate taxes, the charitable deduction presents a path of least resistance in Washington.  If a cap on total deductions prevails, the damage on charitable deductions will be more severe than if a limit representing a percentage of AGI is imposed specifically for charitable deductions.

We agree with those criticizing the White House for urging nonprofit organizations to focus attention on increasing taxes for the very rich. Whether or not that’s a good idea, it’s irrelevant to nonprofit organizations’ best interests. Nonprofits should be focusing their attention on keeping Washington from capping all deductions. Everyone has to pay those state and local taxes and everyone with a mortgage has to pay interest on their loans. No one has to make contributions.

More On and Moron Tax Expenditures

Posted by Christopher Dann
Monday December 3, 2012
Categories: Fundraising, Politics
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As the federal government continues pursuit of balance among acceptable targets of revenue, expense, and deficit, we should do more than hope that our representatives understand how their decisions have widely varying impact. The nonprofit sector presents a wide diversity of business models, and this is well documented by varying dependencies on diverse sources of income.

Another useful look at the sector offered by the Urban Institute’s The Nonprofit Almanac 2012 is summarized in the table below. It shows percentages of income from multiple sources that affect different profiles across nonprofit sub-sectors.

The first thing our federal representatives need to understand as they address both taxing and spending is the interdependence of government and the nonprofit sector. It was blindness to that interdependence that resulted in the Reagan Administration’s wreaking havoc on the nonprofit sector in the ’80s.

The second thing they need to understand is how changing the deductibility of charitable giving variously impacts nonprofit sub-sectors. Multiple factors affect variability of business and therefore revenue models:

  • domestic policy emphases — what are the federal government’s current priorities?
  • individual and institutional donor market disposition — the varied charitable and philanthropic preferences of these private sources of money
  • a nonprofit sub-sector’s program capacity for retailing (or collecting fees) for services — and the consequent variable balance between discretionary and non-discretionary funding

Clearly, the situation is far too complicated for resolution through legislation (although the enormity of the Tax Code suggests complexity has never been a challenge Congress couldn’t deal with!). So the watchword for changing the balance between taxing and spending so far as the nonprofit sector is concerned is transition. And as much as another term evokes partisan bickering, transition should include provision of a safety net for those sub-sectors — particularly health and human services — where transition to the new government/nonprofit sector paradigm may take much longer than the target timetable for deficit reduction provides.

There is, meanwhile, something much simpler our representatives can do to find net improvement in the tax and expenditure balance. Their policy mandate should be to reconsider the proper roles of government and the nonprofit sector with respect to what nonprofit enterprises deserve government support through the tax expenditures of federal tax exemption.

On November 14, David Evans of Bloomberg Businessweek¹ previewed a December Bloomberg Markets report on a class of highly profitable nonprofit organizations distinctive from those the term normally connotes. While the Urban Institute classifies those we normally envisage as “Nonprofit Institutions Serving Households” or NPISH, those about which Mr. Evans wrote we might classify as NPINO or Nonprofits In Name Only.

These NPINOs include the article’s featured American Bureau of Shipping who “paid no income tax from 2004 to 2011 on just less than $600 billion in profits.”  Also cited were United States Polo Association (which spent only 13% of the $9.9 million it earned from royalties and investments in 2010 on polo program services), the National Football League (earning $27.9 billion in television contracts over 9 years, paid its commissioner $11.6 million in fiscal 2011), and the National Hockey League. Mr. Evans didn’t cite, but well could have, the NCAA, which Joe Nocera of the New York Times has shown to be in the profitable service of both media and big-name universities albeit frequently at the expense of college athletes.

Write your Congressman!


¹http://www.businessweek.com/news/2102-11-14/tax-exempt-firm-gets-600-million-profit-flying-first-class

Fiscal Chasms

Posted by Christopher Dann
Monday November 26, 2012
Categories: Fundraising, Statistics, Uncategorized
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For all concerned with piloting nonprofit organizations through the cross-currents immediately ahead of us, the new edition of the Urban Institute Press Nonprofit Almanac 2102 has arrived just in time. It’s been four turbulent years since the last edition, and we are in bad need of new points of reckoning.

The Urban Institute smartly focuses its attention on “reporting public charities,” 501(c)(3) organizations that file 990s with the IRS, not including religious organizations and congregations or those with income less than $50,000 in 2010 ($25,000 in prior years).  These criteria allow us to focus on organizations vying for financial support through service fees or charity.

One thing we looked forward to the new report enabling us to do was checking on donor market competition. Both fundraising performance data and the anecdotal experiences of clients indicate competition has been intensifying. The data show long-term erosion of donor retention rates, and the most troubling anecdotal experience is increasing incidence of donor complaints in response to solicitations which we believe have a lot to do with marketplace din.

The Urban Institute’s data certainly explain these observations. But, more importantly, they call attention to the need to do forward resource development planning beyond the bounds of fundraising strategy. That’s because there is no exception to the observation that the expansion of the nonprofit sector, sub-sector by sub-sector, has been exceeding the expansion of revenue in general, and giving in particular. And while we are these days staring like head-lighted deer at sundry propositions for changing charitable deductions, we need to think about how competition could get worse.

While giving through bequests and from foundations and corporations increased from 2000 to 2010, individual giving — apart from bequests — declined. The overall decline was 4% and the per capita decline was 12%. And while individual giving – again apart from bequests – accounted for 76% of all giving in 2000 and a lesser 73% in 2010, it remains dominant. It is also the most complex and expensive source to develop.

The sub-sectors vary in their appeals to and their calls on the donor marketplace. Of those selected to list below, higher education and disease-specific health organizations depend to far lesser degrees on individual charitable support than do environment and human services organizations. Yet whenever there is pressure on total revenue, it is certain there will be pressure on fundraising. We have heard and read a lot over the past few months, for example, about the tensions in the business models of both private and public universities with expenses outstripping revenue capacities of tuition and fees, government funding of public universities and endowment funding of private universities (to say nothing of athletics where that has become a big business).

The data for animal-related nonprofit organizations offer a preview of what we believe is most likely to befall human services organizations in the years immediately ahead. Community animal welfare has been dominated by a tax-supported business model, as the vast majority of animal welfare organizations have been operating under government contract to conduct what are called animal control services. As municipal budgets have become increasingly strained (they must balance their budgets), that funding has been reduced and the services provided have become increasingly limited. The result has been an explosion in nonprofit organizations such as breed-specific rescue groups to take up the slack.

While the Urban Institute keeps tabs as no other entity does on the nonprofit sector community by community, their Nonprofit Almanacs do not offer data more refined than by states. It is pretty clear, anyway, that the expansion of the nonprofit sector has been predominantly with community-based organizations. This means, in part, that increased competition for income is having greatest impact on organizations that have least opportunity to respond because their markets are limited.

When we take such information into account, as well as what will soon come our way out of successful or failed negotiations in Washington, we can imagine a nonprofit sector at 2020 that looks an awful lot different than what it looked like in 2000 and 2010. When we consider how fast the last ten years flew by and – being honest about it – how few business model changes organizations made, we realize how urgently we must attend to necessary change. We can anticipate:

  • Mergers of organizations within sub-sectors, especially in large metro areas, and by state in rural-dominant areas
  • Regional or national collaborations in program services, financial asset management, and in fundraising and supporting services
  • Increased incidence of national raider organizations consuming the lunches of community organizations, especially through electronic media
  • A mass of organizations in one phase or another of failure

Notes from Dreamforce: Scale and collaboration

Posted by Christopher Dann
Tuesday September 25, 2012
Categories: Dreamforce, Fundraising
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The disruptive technology and revolutionary enterprise that has become Sales Force hold great promise for the nonprofit sector, but they could not have been incubated and grown in the sector. The nonprofit sector is too fractured and doesn’t present sufficient scale to make venturing capital of sufficient magnitude a reasonable proposition.

Even now that the platform is built and Sales Force Foundation partners are developing applications for the nonprofit sector, the benefits of the technology will not accrue to a vast majority of nonprofit organizations for a long time. As we learned from those offering the most useful tools, their target markets are organizations raising $10 million or more. While that threshold offers Sales Force Foundation partner businesses an ample market, it is a market comprised of just 3% to 5% of reporting public charities, those charities whose minimum income requires filing with the IRS.

The one opportunity for organizations under that threshold is through collaboration. It is terribly ironic that collaboration is less likely in the nonprofit sector than in the for-profit world and that its best opportunities are among organizations that would most benefit from Sales Force technologies.

Collaboration is unlikely in the nonprofit sector for reasons of institutional ego. In its benevolent aspects, nonprofit institutional ego arises out of conviction that an organization is best suited to fulfill the mission it is addressing. But, alas, the non-benevolent aspects of institutional ego seem to prevail: the convictions of board and staff members that it is they who are most responsible for the organization’s suitability.

Why would organizations under that $10 million individual contributions threshold most benefit from Sales Force-engendered technologies?  Because most of them are community-based organizations with both support and program constituencies. And while Sales Force rightly insists that “business is social,” there is nothing more social than community-based nonprofit enterprise.

Collaboration in this sub-sector of the nonprofit sector should actually come easiest. Think of the numbers of organizations not competing with one another, addressing the same mission with essentially the same program in cities all across the land.  United Ways. Hospices. Community animal welfare organizations. Libraries. Symphonies. Food banks. Land trusts.

There is enormous opportunity for leadership here. It must come from within, because whatever comes from without is likely to exploit more than benefit the organizations.

Next Generation Fundraising and Drakes Bay Fundraising merged in the fall of 2013, bringing the longstanding professional acquaintances of their four principals – Tim Oleary, Carol Leister, Cindy Germain, and Christopher Dann – into a single company and combining the special resources and experiences of each to provide clients greater breadth and depth of service.

For more information about Next Generation Fundraising, click here.